University of Virginia Library

[Form of Back of Bond]

This Bond is one of a duly authorized issue of Bonds of the University aggregating One Hundred Ten Million Dollars ($110,000,000) in principal amount, known as "Fixed/Adjustable Rate Hospital Revenue Bonds (Series B)" (the "Bonds"), issued under and pursuant to a resolution adopted by the Executive Committee of the Board of Visitors of the University (the "Board") on November 30, 1984 (the "Master Resolution"), as supplemented by a Series Resolution adopted by the Executive Committee on November 30, 1984 (the "Series Resolution") (said Master Resolution, as supplemented, being herein called the "Resolution"). This Bond is issued and the Resolution was adopted under and pursuant to the Constitution and laws of the Commonwealth of Virginia, particularly Chapter 3, Title 23, Code of Virginia, 1950, as amended (herein called the "Act"). Reference is hereby made to the Resolution for the provisions, among others, with respect to the custody and application of the proceeds of Bonds issued under the Resolution, the collection and disposition of revenues, the funds charged with and pledged to the payment of the interest on and the principal of the Bonds, the nature and extent of the security, the terms and conditions on which the Bonds are or other series of bonds may be issued, the rights, duties and obligations of the University and the rights of the holders of the Bonds. Capitalized terms not defined herein shall be as defined in the Resolution. By the acceptance of this Bond, the holder hereof assents to all of the provisions of the Resolution.

The Resolution provides for the issuance from time to time, under the conditions, limitations and restrictions therein set forth, of additional series of Bonds.

As additional security for the payment of principal of and interest on the Bonds until the Fixed Rate Date, the University has caused to be delivered to the Paying Agent an irrevocable

letter of credit in the initial stated amount of One Hundred Ten Million Dollars ($110,000,000) with an initial expiration date of December 14, 1991 (the "Credit Facility") issued by The Long-Term Credit Bank of Japan, Limited acting through its New York Branch (the "Bank") pursuant to a letter of credit and reimbursement agreement, dated as of November 1, 1984 (the "Reimbursement Agreement") between the Bank and the University. The Paying Agent shall draw upon the Credit Facility (a) to pay principal of the Bonds due on mandatory or optional redemption, acceleration or maturity, and (b) to the extent the proceeds of sale derived from any remarketing of Bonds shall be insufficient for such purpose, to pay the purchase price of Bonds tendered or deemed to have been tendered to the Paying Agent for purchase. The initial Credit Facility shall terminate upon the earliest to occur of (i) December 14, 1991 or any later date to which the Credit Facility has been extended, (ii) the date following the Fixed Rate Date, (iii) the date as of which the Credit Facility is cancelled by notice from the University and the Paying Agent to the Bank, (iv) the date following the date on which there shall be a drawing to pay the principal of all Bonds tendered or deemed to be tendered and not remarketed upon the mandatory tender of the Bonds pursuant to the Series Resolution, or (v) the date that all of the Bonds shall no longer be outstanding under the Series Resolution. Bonds transferred to the Bank upon the payment thereof with the proceeds of a drawing on the Credit Facility shall not be deemed to have been paid for purposes of the Resolution and shall continue to be an obligation of the University until the principal of and interest thereon is paid by the University to the Bank. The University may, upon the conditions specified in the Series Resolution, provide for the extension of the Credit Facility or the delivery to the Paying Agent of a Substitute Credit Facility or Alternate Credit Facility.

In the event the University elects to convert the Bonds to a fixed interest rate or is unable to arrange for the extension of the Credit Facility or any Substitute Credit Facility prior to the expiration date thereof (unless such date is after the Fixed Rate Date or after the final maturity of the Bonds) on substantially the same terms as originally issued, or if at any time the University proposes to obtain an Alternate Credit Facility or to amend the Series Resolution in certain respects, the Paying Agent shall give, or cause to be given, written notice to the holders prior to the Fixed Rate Date, the expiration date of the Credit Facility or Substitute Credit Facility, the effective date of the proposed Alternate Credit Facility or the amendment to the Series Resolution. THE HOLDER OF THIS BOND, BY ACCEPTANCE HEREOF, AGREES TO SELL THIS BOND TO THE PAYING AGENT ON THE FIXED RATE DATE, ON THE ALTERNATE CREDIT DATE AND ON THE AMENDMENT DATE (UNLESS SUCH HOLDER DELIVERS NOTICE OF ITS ELECTION TO RETAIN THIS BOND TO THE PAYING AGENT BY THE FIFTEENTH DAY PRIOR TO SUCH DATE), AT A PRICE

OF PAR, AND UPON SUCH PURCHASE TO SURRENDER THIS BOND, PROPERLY ENDORSED FOR TRANSFER IN BLANK. In the event (i) the Bank shall require the Paying Agent to cause the mandatory tender for purchase of all Bonds as a result of an event of default under the Reimbursement Agreement, (ii) the State Treasurer notifies the Paying Agent that there are not sufficient Net Revenues to make the deposits to the Reserve Account required by the Resolution or (iii) an Act of Bankruptcy occurs, the Paying Agent shall give, or cause to be given, written notice to each holder prior to the mandatory purchase date AND THE HOLDER OF THIS BOND, BY ACCEPTANCE HEREOF, AGREES TO SELL THIS BOND TO THE PAYING AGENT ON THE MANDATORY PURCHASE DATE SPECIFIED IN SUCH NOTICE AT A PRICE OF PAR PLUS, IF THE MANDATORY PURCHASE DATE IS A DATE OTHER THAN JUNE 1 OR DECEMBER 1, ACCRUED INTEREST HEREON, AND UPON SUCH PURCHASE TO SURRENDER THIS BOND, PROPERLY ENDORSED FOR TRANSFER IN BLANK.

Except as otherwise provided with respect to Bank Bonds, the Bonds that are stated to mature on December 1, 2010 shall bear interest to and including November 30, 1987, at the rate of seven and fifty hundredths percent (7.50%) per annum, the Bonds that are stated to mature on December 1, 2014 shall bear interest to and including November 30, 1988 at the rate of seven and seventy-five hundredths percent (7.75%) per annum, and the Bonds that are stated to mature on December 1, 2018 shall bear interest to and including November 30, 1989, at the rate of eight percent (8.00%) per annum. Thereafter, unless the Bonds shall have been converted to bear the Fixed Interest Rate (as hereinafter defined), the Bonds shall bear interest at a rate per annum equal to the Adjustable Interest Rate for each period from and including December 1 in each year to and including November 30 in the next succeeding year (each of which 12-month periods is herein called a "Rate Period"), which shall be determined as hereinafter described:

Prior to establishing the Adjustable Interest Rate, a Preliminary Adjustable Interest Rate shall be determined. The Preliminary Adjustable Interest Rate for each Rate Period will be a rate determined by the Remarketing Agent on the Business Day next preceding November 1 in each year prior to the Fixed Rate Date in which an Adjustable Interest Rate is to be established (the "Determination Date") to be that rate which, in the judgment of the Remarketing Agent based on prevailing market rates, such judgment to be exercised in its sole discretion, is the minimum rate necessary for the Remarketing Agent (initially Goldman, Sachs & Co.) to sell all of the Bonds which may be delivered to the Paying Agent or deemed to have been tendered for purchase pursuant to the Resolution at par on the first day of such Rate Period.

On each Determination Date the Remarketing Agent shall notify the Paying Agent and the University of the Preliminary Adjustable Interest Rate for the next succeeding Rate Period by telephone or other telecommunications device and shall confirm such notice in writing as soon as practicable thereafter. Notice of such Preliminary Adjustable Interest Rate shall be mailed by first-class mail by the Paying Agent to each holder of Bonds that will bear interest at the Adjustable Interest Rate for the next Rate Period at his address as shown on the registration books on or before the second Business Day following such Determination Date. Such notice shall state (i) that the interest rate on the Bonds will be adjusted as of the next succeeding December 1 and (ii) the Preliminary Adjustable Interest Rate.

The Adjustable Interest Rate effective for each Rate Period prior to the Fixed Rate Date shall be a rate established by the Remarketing Agent on the third Business Day next preceding each Rate Period and shall be determined as hereinafter described. If no Bonds shall have been properly delivered to the Paying Agent or deemed to have been tendered for purchase on the first day of such Rate Period, the interest rate borne by all Bonds for such Rate Period will be a rate per annum equal to the Preliminary Adjustable Interest Rate determined for such Rate Period. If any Bonds shall have been properly delivered to the Paying Agent for purchase or deemed to have been tendered on the first day of such Rate Period, the interest rate borne for all Bonds for such Rate Period will be a rate determined by the Remarketing Agent to be that rate which, in the judgment of the Remarketing Agent based on prevailing market rates, such judgment to be exercised in its sole discretion, is the minimum rate necessary for the Remarketing Agent to sell all of the Bonds so delivered at par on the first day of such Rate Period.

On the Business Day following the determination of the Adjustable Interest Rate for the next succeeding Rate Period the Remarketing Agent shall notify the Paying Agent and the University of such Adjustable Interest Rate for such period by telephone or other telecommunications device and shall confirm such notice in writing as soon as practicable thereafter. Notice of the Adjustable Interest Rate for each Rate Period shall be mailed by first-class mail by the Paying Agent to each holder of Bonds on or before the second Business Day after its determination.

As to Bonds which are not Bank Bonds, in no event shall the Adjustable Interest Rate exceed fifteen percent (15%) per annum (the "Maximum Interest Rate") unless the University shall have amended the Resolution to approve a higher Maximum Interest Rate or be less than the Preliminary Adjustable Interest Rate.

If (i) the State Treasurer, the Bank, the Paying Agent and the Remarketing Agent shall have received a notice from the University given not less than 45 days in advance of December 1 in the Effective Year or in any year thereafter to the effect that the University elects to convert all of the Bonds to a Fixed Interest Rate on the next Fixed Rate Date together with an Opinion of bond counsel that such conversion will not cause interest on the Bonds to be subject to federal income tax, or (ii) at least forty-five (45) days prior to the expiration date of the Credit Facility, or any Substitute Credit Facility or Alternate Credit Facility, the University shall not have delivered a new Substitute Credit Facility or Alternate Credit Facility to the Paying Agent in accordance with the provisions of the Resolution, a Fixed Interest Rate for the Bonds of each stated maturity shall be established at a rate computed as hereinafter set forth on the next Fixed Rate Date.

Prior to establishing a Fixed Interest Rate for the Bonds of each stated maturity, a Preliminary Fixed Interest Rate for the Bonds of each stated maturity shall be determined by the Remarketing Agent. The Preliminary Fixed Interest Rate for the Bonds of each stated maturity will be that rate which, in the judgment of the Remarketing Agent based on prevailing market rates, such judgment to be exercised in its sole discretion, is the minimum rate necessary for the Remarketing Agent to sell all of the Bonds of such maturity deemed to have been tendered at par on the Fixed Rate Date. On the Determination Date, the Remarketing Agent shall notify the Paying Agent and the State Treasurer of each Preliminary Fixed Interest Rate by telephone or other telecommunications device and shall confirm such notice in writing as soon as practicable thereafter. Notice of the Preliminary Fixed Interest Rates will be mailed by first class mail by the Paying Agent to each holder of Bonds at his address as shown on the registration books on or before the second Business Day following such Determination Date. Such notice shall (i) specify the Fixed Rate Date, (ii) state that after the Fixed Rate Date the holders shall no longer be entitled to deliver Bonds for purchase pursuant to the Series Resolution and that funds provided by the Credit Facility will no longer be available to pay principal on the Bonds, (iii) state, if available, what the Moody's rating on the Bond will be after the Fixed Rate Date, (iv) state that the interest rate on the Bonds of each stated maturity will be converted as of the Fixed Rate Date to be the Preliminary Fixed Interest Rate for such maturity or, if higher, the Fixed Interest Rate for such maturity determined as provided in the Series Resolution and that such rate will remain in effect from and including the Fixed Rate Date until payment of the principal or redemption price of the Bonds of such maturity shall have been made or provided for in accordance with the Series Resolution, whether at maturity, upon redemption or otherwise, (v) state the

Preliminary Interest Rates for the Bonds of each stated maturity, (vi) state that all holders who wish to continue to own Bonds must give notice to that effect to the Paying Agent no later than 4:00 P.M., New York time, on the November 15 prior to the Fixed Rate Date or be deemed to have tendered their Bonds for purchase and (vii) state that any holders of Bonds that are deemed to have tendered their Bonds shall not be entitled to any payment (including any interest to accrue subsequently to the Fixed Rate Date) other than the purchase price for such Bonds which shall be equal to the unpaid principal amount of such Bonds, and such Bonds shall no longer be entitled to the benefits of the Resolution except for the purpose of payment of the purchase price therefor, which payment shall be made only upon the surrender of such Bonds at the principal corporate trust office of the Paying Agent.

The Remarketing Agent shall determine the Fixed Interest Rate for the Bonds of each stated maturity on the third Business Day next preceding the Fixed Rate Date as hereinafter described. If no Bonds of a stated maturity shall be deemed to have been tendered to the Paying Agent for purchase on the Fixed Rate Date, the interest rate borne by all Bonds of such stated maturity will be a rate per annum equal to the Preliminary Fixed Interest Rate for the Bonds of such stated maturity. If any Bonds of a stated maturity shall be deemed to have been tendered to the Paying Agent for purchase on the Fixed Rate Date, the interest rate borne by all Bonds of such stated maturity will be a rate determined by the Remarketing Agent to be that rate, which, in the judgment of the Remarketing Agent based on prevailing market rates, such judgment to be exercised in its sole discretion, is the minimum rate necessary for the Remarketing Agent to sell all Bonds of such stated maturity deemed to have been tendered at par on the Fixed Interest Date.

On the Business Day following the determination of the Fixed Interest Rates the Remarketing Agent shall notify the Paying Agent and the University of the Fixed Interest Rates by telephone or other telecommunications device and shall confirm such notice in writing as soon as practicable thereafter. Notice of the Fixed Interest Rates shall be mailed by first-class mail by the Paying Agent to each holder of Bonds on or before the second Business Day after their determination.

The determination of the Adjusted Interest Rate and the Fixed Interest Rates by the Remarketing Agent shall be conclusive and binding upon the holders of the Bonds.

On any December 1 commencing December 1, 1987 with respect to Bonds maturing in 2010, December 1, 1988 with respect to Bonds maturing in 2014 and December 1, 1989 with respect to Bonds maturing in 2018, prior to the Fixed Rate Date, any Bond (other

than a Bank Bond) shall be purchased upon the demand of the owner thereof, at a purchase price equal to the principal amount thereof, if an appropriate written instrument of transfer, together with (in the case of all holders that are not registered investment companies) such Bond, shall have been delivered for purchase to the Paying Agent at its principal corporate trust office in New York, New York not earlier than October 15 and not later than four o'clock p.m., New York time, on the November 15 next preceding such December 1. On the Fixed Rate Date, the registered owner of any Bond will be deemed to have elected to have such Bond purchased by the Paying Agent, unless such owner notifies the Paying Agent in writing received by the November 15 prior to the Fixed Rate Date, of its desire to retain such Bonds after such Fixed Rate Date.

In the event that any Bonds tendered or deemed to have been tendered are not delivered to the Paying Agent on the appropriate tender date, no further interest on such Bonds shall be payable to the prior holders thereof after such tender date. Any such Bonds shall be deemed to have been sold by such prior holders and such prior holders shall have recourse solely to the funds held by the Paying Agent for the purchase of such Bonds, and the Paying Agent shall not recognize any further transfer of such Bonds by such prior holder.

The Bonds are subject to optional redemption prior to and on the Fixed Rate Date, at the option of the University, on any Interest Payment Date on or after December 1, 1987 with respect to Bonds maturing in 2010, December 1, 1988 with respect to Bond maturing in 2014 and December 1, 1989 with respect to Bonds maturing in 2018, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus interest accrued to the redemption date.

After the Fixed Rate Date, the Bonds shall be subject to optional redemption by the University on or after December 1 of the Redemption Year, in whole at any time or in part on any Interest Payment Date, less than all of such Bonds to be selected in such manner as the Paying Agent may determine, at the redemption prices set forth below:

  

Period (both dates inclusive)	Redemption Price
December 1 of the Redemption Year, through November 30 of the first year following the Redemption Year	102%

  

December 1 of the first year following the Redemption Year, through November 30 of the second Year following the Redemption Year	101
December 1 of the second year following the Redemption Year, and thereafter	100

The Bonds are subject to mandatory redemption on December 1 of the years 2002 to 2018, inclusive, in an amount equal to the Sinking Fund Requirement (as defined in the Series Resolution) at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date.

The principal amount of Bonds which are Bank Bonds purchased upon the optional or mandatory tender thereof (the "Tendered Bank Bonds") (other than Bonds purchased upon the mandatory tender thereof following an event of default under the Reimbursement Agreement shall be payable by the University to the Bank on the earliest of the date of maturity, mandatory redemption or remarketing of such Bank Bonds. The principal amount of Tendered Bank Bonds which is unpaid at the termination of the Credit Facility shall be due and payable in six semiannual installments in amounts equal to the amount necessary, assuming a rate of interest of ten percent (10%) per annum on the basis of a 365/366 day year, to result in six approximately equal payments of principal and such assumed interest. Interest on such Tendered Bank Bonds shall be payable at the time of payment of the principal amount thereof and on the first Business Day of each month. The principal amount of Bonds which are Bank Bonds purchased upon the payment thereof on the date of maturity or redemption (the "Principal Bank Bonds") shall be due and payable immediately upon the purchase thereof and interest thereon shall be payable upon demand. Principal of and interest on Tendered Bank Bonds purchased upon the mandatory tender thereof following an event of default under the Reimbursement Agreement shall be payable at the demand of the Bank. Such Tendered Bank Bonds shall bear interest at the Bank Default Rate. Other Tendered Bank Bonds shall bear interest at the Tendered Bank Bond Interest Rate and Principal Bank Bonds shall bear interest at the Bank Default Rate. The Bank Default Rate shall equal the rate announced by the Bank from time to time as its prime lending rate for commercial loans in the United States (the "Prime Lending Rate") plus 2% per annum on the basis of a 365/366-day year. The Tendered Bank Bond Interest Rate shall equal (i) for the period commencing on the date of delivery of a Bank Bond to the Bank or its designee to and including the date 30 days thereafter, the lesser of (x) the sum of 100% of the Federal Funds Rate (as defined in the Resolution) in effect from time to time plus 1/2 of 1% per annum calculated on the basis of a 360-day year and (y) 100% of the Prime Lending Rate in effect from time to time calculated on the basis of a 365/366-day

year and (ii) after such initial 30-day period, 100% of the Prime Lending Rate in effect from time to time calculated on the basis of a 365/366-day year.

Bank Bonds shall be selected first upon an optional or mandatory redemption of less than all of the Bonds.

The Bonds are issuable as fully registered Bonds in denominations of $5,000 or any whole multiple thereof. Bonds may be exchanged at the principal corporate trust office of the Paying Agent, in the manner and subject to the limitations and conditions provided in the Resolution, for an equal aggregate principal amount of Bonds of the same maturity, bearing interest at the same rate and of any authorized denominations.

The transfer of this Bond is registrable by the registered owner hereof in person or by his attorney or legal representative at the principal corporate trust office of the Paying Agent, but only in the manner and subject to the limitations and conditions provided in the Resolution and upon surrender and cancellation of this Bond. Upon any such registration of transfer, the University shall execute and the Paying Agent shall authenticate and deliver in exchange for this Bond a new Bond or Bonds, registered in the name of the transferee, of authorized denominations, in an aggregate principal amount equal to the principal amount of this Bond.

The registered owner of this Bond shall have no right to enforce the provisions of the Resolution or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Resolution, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Resolution and except that any registered owner may institute action to enforce the payment of the principal of or the interest of his Bond.

Upon the occurrence of certain events, and on the conditions, in the manner and with the effect set forth in the Resolution, the principal of all Bonds then outstanding under the Resolution may become or may be declared due and payable before their stated maturity, together with the interest accrued thereon.

Modifications or alterations of the Resolution may be made only to the extent and in the circumstances permitted by the Resolution.

Neither the members of the Board nor any person executing this Bond are liable personally hereon or subject to any personal liability or accountability by reason of the issuance hereof.

This Bond shall not be valid or become obligatory for any purpose or be entitled to any benefit or security under the Resolution until it shall have been authenticated by the execution by the Paying Agent of the certificate of authentication endorsed hereon.